An economic growth without growth for 2024, if not based on inclusiveness

As shown in the World Economic Outlook a few days ago, while the world has shown remarkable resilience, the recovery from the shocks of recent years is slow, below its potential and uneven.

Growth is slow, because at 3-4 percent, growth is currently on average for years of economic weakness. Medium-term growth prospects are also weak and below the potential needed to narrow the differences with the vanguard countries of the Balkan region, but especially the EU.

But the Albanian economic growth is also uneven, because the economic “scar” from the last shocks is vastly different in different regions of the country [1] and with many differences with the region of Tirana and the regions around the capital.

After a prolonged period of economic “convergence”[2], a dangerous divergence has emerged between regions within the country, but also with countries neighboring Albania. Exacerbated by fragmentation, structural changes and the fragility of reforms, many processes are at a breaking point.

The Berlin process, but not only it, is particularly appropriate because if politicians with a mediocre approach manage to follow it, they would orient economies towards sustainable developments in closing the income gap with advanced economies and generating job growth.

All this must be done by considering the criteria of decent work, climate, and environmental impacts, as well as respecting the critical voice and local expertise, giving up ignoring and instead strengthening the principles of inclusiveness.

Writing a better history for the Albanians of the Balkans is only possible by understanding that the cooperation between them is the same as the functioning of a body with all its limbs. In this moment of uncertainty and uncertainty, influenced by the mixed crises that also surround the Western Balkans, it is necessary to introduce into daily life investments in strong economic bases and increase the strength of the economy through cooperation inside and outside countries. The same trend applies to the Albanian states, as well as those where the presence of the Albanian population is a state-forming element.

In an environment with weak medium-term growth prospects, appropriate policies and reforms are essential considering that the malignancy of corruption and patronage/political interference in the processes of the rule of law will be fought without compromise.

Policymakers must think about how to mobilize resources and reinforce strong economic foundations through sound policies.

In terms of short-term policies, it is necessary that price stability is not the only goal, defocusing approved policies of developments and demands for change. Although reducing inflation is a prerequisite for economic growth and protects people, especially the poor from impoverishment, it is necessary for the government and the Bank of Albania not to overdo it and be vigilant in fulfilling many other tasks that respectively they left them in the middle of the road, or they didn’t have the power to carry out as they promised. However, the fight against inflation remains paramount.

But maintaining financial health is just as important. The impacts on the market and public finances are at elevated levels. We are facing further severe financial tightening, and this could hit markets, banks and non-banks alike. Strong supervision is essential.

Complementing the underlying policies, transformative reforms are the essential part to boost medium-term growth.

However, for the reforms to proceed, it is necessary to improve governance by helping to fight corruption. The chain effect after that is simple, based on clearer policy adaptations, not hostage to frequent changes, making it easier to open, run and strengthen businesses. The main objective is to have a remarkably high number of medium-sized businesses, as they are really the engine that generates the productivity and competitiveness needed to expand the market abroad. If the segment of medium-sized businesses is not expanded, then we will have the same problematic situation of doing business, but also businesses with low dynamism.

An innovative approach applies to all current and new processes, which must consider that the cost of protecting the environment and serving oneself are already a need that should not be overlooked. Many businesses and citizens are feeling the consequences of climate change and environmental destruction today, but tomorrow tourism will also feel it, especially the young generation. Meanwhile, addressing rising inequality and facilitating the green transition are essential for inclusive and sustainable growth.

On the other side, politicians should not be complacent with what has been achieved, but new will is needed in terms of continuity and consolidation of reforms to stimulate the productive economy and improve access to capital.

The highest return of all comes from investing in people. Especially education to prepare young people for the jobs of today and tomorrow.

To make investments in sectors that have this high return on invested capital, one must think beyond tourism and related services. The greatest achievement expected from reforming the economy and the mindset of politicians is the mobilization of domestic resources that are still an immense potential.

Ndërsa, fondet që nevojiten për këto investime në fusha dhe aktivitete që përfaqësojnë të ardhmen nuk duhen bazuar te investimi i jashtëm, më shumë se te investimi i brendshëm.

External financing, of course, still maintains a critical role, but it still unsuccessful because of delays and dependencies in the bureaucratic projects that come, as the burden of time together with that of debt is a noticeably big obstacle to advance with the reform of the economy in stages.

A careful attention is needed for the incentives that will be used to increase participation in the labor force, especially for women and young people, orienting the economy with new businesses precisely to the demands that these groups have for work and dignity.

The right package of reforms introduced in the integrated model with all the elements above can increase production levels by up to 10 percent in four years.

In this direction, with the activation and use of local intellectual capacities in the function of studies and the initiation of a great discussion on the modes of operation related to each other, as well as the creation of a great coalition for the transformation, potentials that can be achieved to transform the mindset and the economy in a brief time based on the change of the current mentality.

So, alongside, and together with structural policies to increase productivity, a dedicated plan is needed to strengthen multilateral cooperation within Albanian society.

[1] https://altax.al/product/ekonomia-e-rajoneve-shqiptare-larg-perspektives-se-zhvillimit-te-qendrueshem/

[2] a process in which the economies of different countries/regions become more like each other. Economic convergence exists when two or more economies tend to reach a similar level of development and wealth.